Calendar Week 23 – 2022
Stocks faded again on Friday night as US jobs data added a healthy 390,000 but wage growth stagnated. Also on Friday , there were warnings from industry leaders such as Mush and Dimon about economic headwinds for the US and the dreaded R word – recession – which pushed stocks lower with NASDAQ leading the market lower. The US dollar regained a bid due to the safe haven flow.
China
Meanwhile, news from China bringing some cities out of lockdown gave the market some impetus on the improvements for China, and this lead to a bid in commodities. Copper and oil both raced higher at the end of the week.
Higher commodities gave the Aussie some strength against its peers, losing some ground to the Greenback late Friday.
Week ahead we have the RBA on Tuesday with an expected rise of 35 basis points to 0.75% with some calling for more. RBA’s expectations of the peak are 3.5% but mark pricing has it peaking at 2.75%, a markedly different horizon and view of global conditions. Also meeting this week is the ECB with the Eurozone likely stay put still. Again the market is pricing in rates to be 0.5% by the end of the year for the Euro, it just has so many issues to deal with, such as record inflation last week, it is like they are a rabbit in headlights, frozen with fright of the outcome. We will finish the week with CPI figures for May from the USA and China.
Currency Guidance
Technically the AUDUSD gave us a signal of potential end to downtrend by posting a higher high to April. With commodity prices still ticking higher and demand from China to increase as it re-opens we might see the Aussie stabilise above 0.72. Then on Tuesday with a rate rise on the cards the Aussie could run and test the 0.618% Fib retracement of 2022 high/low at 0.7343 later this week.
The EURUSD still looks bearish and with no fundamental reason to be a buyer, am happy to fade this with a view of it testing the 1.0350 support again in coming weeks.
The GBPUSD also looks shot as the Greenback ramps up again. The US Dollar as a safe haven whilst stocks tank and Ukraine burns will continue to dominate the Cable and Euro. Expect buyers for the Sterling to come back in under 1.22.
USDJPY retesting April highs of 131.30. RSI is getting exhausted, however I suspect we will see 134 maybe even 135 for this pair on this run. The key will be if 131.30 can hold. If sellers dominate of this level, look to fade it with them but I would not be a seller of US dollars for too long in this current environment.
USDCAD has almost made its way across the range as oil is with in a dummy spit distance of its initial Ukrainian wartime highs. I still see this as tricky as I would prefer to be long USD and also long CAD rather than having to sell one of them. So, maybe buy the Loonie against weakness like YEN, GBP or EUR.
NZDUSD has hit some major resistance and I would expect it to struggle higher from here.
